The UK’s trillion euro counter-claim against the EU

Miles Saltiel, March 2017

The EU’s lead negotiator, Michel Barnier, has indicated that his first order of business after the UK’s triggering of Article 50 will be to present a bill. This will be for the UK’s share of future commitments (agreed policies, pensions and such like), less its share of the value of assets (mainly property). Barnier has also indicated that he wants to agree a sum or at least a formula for calculation, before moving on to anything else.

On 4th March, the House of Lords EU Financial Affairs Sub-Committee reported that Article 50 ‘allows the UK to leave the EU without being liable for outstanding financial obligations under the EU budget…’; that after Brexit, ‘all EU law – including provisions concerning ongoing financial contributions and machinery for adjudication – will cease to apply, and the UK would be subject to no enforceable obligation to make any financial contribution at all’; and concludes that ‘the UK will not be strictly obliged, as a matter of law, to render any payments at all after leaving’.

The sub-committee reached its conclusions on advice from the Counsel for European Legislation in the Commons, formerly a legal and policy adviser to the European Commission. No doubt, something along these lines will be the UK’s opening ‘high road’ position. But if the EU fails to accept the principle that Brexit brings obligations to an end, then expect the ‘low road’ to kick in with a warning that the traffic goes two ways: the UK cannot rule out lodging its own counter-claim á la Trump.

The word is that Barnier is going for €60bn or so. If he sticks to this, HMG’s negotiators would want to steer clear of taking a knife to a gunfight: they would wish to avoid the unforced error of confining their counter-claim to the €10bn of EIB assets apparently attributable to the UK or even to the larger sums in the ether, said to equal Barnier’s own €60bn. Instead they would want to channel their inner Donald. They would best do so by ventilating totals of the order of €1tn and invoking the provisions of the Treaty of Lisbon which oblige the EU to assume liability for its actions (II, Part Seven, Article 340). The following preliminary estimates for heads of claim marginally exceed the headline total: bases of calculations can be found in the PDF.

Return of the current value of contributions accumulated since the UK’s accession to the EU, where expended fraudulently, extravagantly, so lethargically as to defeat their purpose, under protest by HMG or UK MEPs, failing to satisfy auditors, or otherwise at odds with good practise: €200bn

Compensation for the accumulation of past increased military expenditure, arising out of EU recklessness in the Western Balkans (taken as incurred from 1992 to 2001) and the Ukraine (taken as incurred from 2009 to date): €65bn

Compensation for the accumulated loss of past output since 2009 for the failure since then to honour commitments to implement the Service Directive in full: €35bn

Compensation for the accumulated loss of past output since the UK’s accession to the EU for its failure to ratify Free Trade Associations (FTAs) in a timely manner with Canada, Korea, Singapore, South Africa, and Vietnam: €15bn

Compensation as (4) for the EU’s failure to initiate FTAs with Australia, China and Taiwan; and to conclude FTAs with Brazil, India, Japan and the US: €80bn

Present value of the accumulated and post-Brexit incremental NHS, social care and other expenditures for treating persons adversely affected by diesel and other pollution from motor vehicles, conforming or purporting to conform to emission regulations stemming from the Vehicle Directive (2007) and thereby represented by EU or member-state regulators as safe: €200bn

Present value of the accumulated and post-Brexit costs of economic output forgone, plus converting electrical power supply to efficient operation, to reverse the adverse effects of the Renewable Energy Directive (2009): €180bn

Present value of the post-Brexit costs of incremental education, health, security and welfare expenditures, arising out of persons residing in this country by reason of failings of border security falling out of the Schengen system, detrimental judgements of the ECJ, or other EU or member-state dysfunctions: €35bn

Provisions for the loss of output and stabilising the UK financial system in the event of failures by UK branches of European banks, passported into this country under EU single-market rules and whose prudent and timely recapitalisation has been frustrated by the ECB or member-state regulators: €55bn

Provisions for the loss of output and stabilising the UK financial system and economy in the event of the failure of the Euro; reserving the right to obtain punitive damages for such injuries should it be shown that the ECB has interpreted its mandate at odds with the intentions of its framers; to the detriment of the public good; under protest from pertinent central banks, regulators or international bodies; at odds with the advice of its auditors; or otherwise recklessly: €200bn

Finally, token compensation for loss of reputation for association with the EU’s chronic dysfunction and maladministration: €25bn

This is hardly an exhaustive list: once HMG’s lawyers take the bit between their teeth, they may be expected to go to town. Of course, the UK was a party to some of the ill-judged decision-making, though our opt-outs on the Area of Freedom, Security and Justice, the Charter of Fundamental Rights, the Euro and Schengen help no end on this score. And not every claim can be expected to succeed in full, if at all. But all of them are (as the lawyers say) arguable.

It is most likely that the EU would reject the UK’s complaints out of hand, but to the extent that a dispute was joined and played out before the bar of world opinion, the EU’s negotiators would face some bear-traps. For example they would court disrepute, were they tempted to hide behind the Treaty’s provisions for limitation periods and jurisdiction (IV, 4, Article 46). This is not so much because the conduct giving rise to these claims continues to this day, but rather that such a stance would position the EU as challenging the widely accepted principle of nemo judex in sua causa (no-one may judge his own cause).

About the Author

Miles Saltiel is a former investment banker and now serves as a Senior Fellow of the Adam Smith Institute. On their behalf, he led teams whose competition entry on Grexit was short-listed for the Wolfson Prize; and on Brexit was shortlisted by the IEA. He currently operates www.brexit2016.uk, a pro bono website hosting material circulated earlier to a restricted number of selected parliamentary, industrial and City figures, together with other interested parties. He read PPE at Oxford.